Macroeconomic Factors Do Influence Aggregate Stock Returns
Mark J. Flannery, University of Florida
Airs A. Protopapadakis, University of Southern California

The authors evaluate the effects of 17 series of macro announcements on the daily returns to the value-weighted market portfolio, over the 1980-96 period. The aim is to identify candidates for macroeconomic “risk factors,” in the context of a MGARCH model. They find six strong candidates: the balance of trade, CPI, PPI, the employment report, housing starts, and some of the monetary aggregates. Surprisingly, the list does not include GNP or industrial production. Several tests show that the results are robust. (Accepted Late Spring 1999.)